Reshma Sohoni – CEO of Seedcamp gave a talk to students at Cambridge on Enterprise Tuesday. Her perspective was that on the whole startup costs had come down by a factor of 10 – especially in software ventures, because there was so much more open source available, many more tools, platforms and other forms of incubation.
For example – with infrastructure:
– Hosting - Amazon Web Services, Google App Engine, Cloud Computing in general
– Software, Design, Technology – Sun Startup, MSFT BizSpark, Open Source, Assembla.com, 99Designs, Creative Commons
– Office Space – Sun Startup, Silicon Roundabout (Moo), Work where you live
– Marketing – Learn SEO, Befriend the bloggers (Zemanta), Become an expert (Mobclix)
– Go virtual as long as possible and avoid office rent, furniture, and phone expenses
And a mindset that says – we need to control costs – be innovative and grow a business by being resourceful was the central message of Seedcamp.
So the examples included:
– Core team should include developers and business development
– Initial hires should be for equity + salary to cover rent and basic food
– Biz Dev and other advisors for equity not fees
– Product - Use your users to iterate and help build your product
– Rent instead of buy;
– Outsource what’s not core;
Her exception was with lawyers and accountants – which she she advocated getting good ones.
Tuesday, 25 November 2008
Reshma Sohoni – CEO of Seedcamp gave a talk to students at Cambridge on Enterprise Tuesday. Her perspective was that on the whole startup costs had come down by a factor of 10 – especially in software ventures, because there was so much more open source available, many more tools, platforms and other forms of incubation.
Tuesday, 18 November 2008
At the moment the reality is that it is hard to find money to get going, customers willing to commit to purchasing anything, budgets that can be signed-off for pilot projects. We even risk current projects being cancelled and the aftermath of senior CEOs from “Bell weather” companies making statements that clearly suggest caution over enterprise!
So, when Dr Hermann Hauser says that the clear signs of a big opportunity is when you can see fast (big) growing markets, have a star team and possess defensible IP (or know how) can see the presence of money in the form of good quality venture capital within a supportive cluster – you look around at the moment and think - No Way!
But – Hermann has been involved in 62 start-ups – four of which have exceeded $1bn valuation – so apart from the macro indicators what else can an entrepreneur see that we can’t?
First – the entrepreneur can see High Quality people – with ideas and the ability to make things happen. Exceptional technology or exceptional ability to articulate a proposition.
Secondly – to ensure that the entrepreneur is in an ecosystem that is conducive to entrepreneurship – and in the case of tech entrepreneurship these would be Silicon Valley, Boston, Cambridge for example. Or if you were trading in spices – you would be on the spice route!! Andy Richards – a Cambridge biotech entrepreneur said that Cambridge was a low risk environment in which to do high risk ventures or as someone else put it les flaterringly – a cluster can be seen as a compost heap – where – when firms die the people are re-cycled!
Sometimes the cold business logic does not always deliver the right answers – for example AT+T were turned off mobile phones, IBM believed there would only ever by a market place for 4 computers and there have been many other gaffes over the decades! A particularly seismic event in technology transfer history is captured in the events that followed the publication of work on the monoclonal antibody. http://eprints.ucl.ac.uk/2079/1/wit1.pdf . In the first instance those in decision making positions did not believe that this work should be patented and only later realized the potential of this work in industrial and commercial terms.
In summary we come to belief, passion and a deep understanding of the opportunity (not just the technology). These together with skills to find opportunities, resources and the ability to chip away at customers and markets may be exactly the qualities we need right now in an economic winter.
Wednesday, 12 November 2008
In reality no one thinks you stand a chance when you are young because you lack track record, credibility, finance and any sense of authority over any resources. “What did I know about brewing, branding or building a business when I graduated as a Lawyer from Cambridge?” What you need though is incredible levels of self-belief and faith in your idea and you only need to be able to turn a few key people in your favour and the others will follow. In my case I got the owner of Mysore Breweries and the brew-master to believe in my idea. I owe them a huge debt of gratitude.
When you have faith in your idea and belief – it does not matter when you start a business. "In my case I started during the last recession in the early 1990s. So I have been there and am convinced that in hard times there are opportunities which others do not or cannot see. So this is the time you can get underway. And it is in this situation that you have to be able to spot the right trends. In our case it was seeing the rapid growth of Indian restaurants in the UK – a trend line demonstrating that UK was becoming a nation of curryholics".
If we combine this understanding of where the market is going and use this information with imagination – in our case we focused hard on it (See Geoffrey Moore’s book on Crossing the Chasm) we can grow at a tremendous rate. We have grown from the early years of a single beer – albeit the best – to now having a product range of 35 items.
You also have to think global – right from the start. When we began ale was 99% of the market. Now it is barely 25% - the rest is Lager. So we are part of that global trend towards lagers. And within this we focused on a fast growing restaurant sector. We describe ourselves as a British company of Indian origin.
Raising money for a global business is complex, but there are so many sources of finance – starting ofcourse with your own money, creditors, debts of various kinds, private investors, grants, careful cash management, customers’ advance payments, bills of lading, venture capital and stock markets. You need to understand the breadth of options and get someone who can help you navigate these various sources with imagination.
Building an A-team. This is stated often by entrepreneurs. In essence the definition used here is to take on people better than you are at specified jobs – such as marketing, sales, finance and other functional specialisms. Although entrepreneurs love to be involved with all aspects of a business – their passion overcomes their own need to delegate – one of the early lessons is to let go to grow.
Marketing is crucial for a global business. In the early days it is important to use Guerilla marketing tactics. Use PR, low cost sponsorships, get samples out there into the market – let people try your services, products – until you establish credibility and enough good will. Then you need to get a strategy based on excellence of product/service; a clear understanding of why you set prices the way you do against competition; ensuring people can access you and your products and building excellent customer service.
Constant drive for restless innovation. Sometimes a core product may not suit all market segments and to get into global markets and grow aggressively the company needs to build in the capacity for constant innovation of products, processes, imagery, marketing, rewards. You need an open mind to succeed. The personal qualities of the senior team needs to be one of taking risks and having foresight and sometimes you ask yourself – why has no one done this before?!
But to know if things are working and to check that your company is being successful – you have to be able to measure everything. You need a transparent system for measurement so everyone can understand what is going on in the business and play their part in the success.
Monday, 3 November 2008
As we run into a brick wall of uncertainty in the world of entrepreneurship – I can remember the last time there was a kind of melt down. It had been caused by dangerous over-speculation on the web. I had been told – it’s not cash flow and customers – it’s about the number of clicks and eyeballs!
Well – 8 years later only a handful of companies have made money out of clicks – Google being a star examplar. In the end they too have to be measured by cash flows. What a relief for common sense.
So in the lecture by Eric Baker from Viagogo – a product of Harvard, Stanford, McKinsey, Bain Capital and Silicon Valley it was such a relief that there was so much common sense and a starting point that acknowledged “no customers = no business”.
Viagogo is an on-line ticket exchange business and charges 25% for its service. It holds no inventory of any kind and gets the cash upfront from the transactions. In other words the business makes a good margin and generates cash in providing affordable ways for people to exchange tickets.
So what is the marketing story.
1. Eric has a great personal background in terms of the education he has received. He also gained experience of this kind of business as an employee of Stubhub in USA.
2. He assembled a fabulous board of advisors. Not only is this a source of advice and route to money, but it provides excellent “brand association” by demonstrating the quality of the company he keeps. This helps to open doors, creates an illusion of size and provides huge levels of credibility.
3. Identifying the new trends. More and more people go online to buy tickets rather than queue in shops and at the venue itself. So the credibility of being able to exchange tickets online is established by the new market trends and behaviors.
4. There are an increasing number of other online exchange sites – such as eBay, so the format is easier to explain to consumers.
5. In addition to getting alongside well respected Board members, Eric did early deals with Soccer Clubs like Manchester United and Chelsea to be recognized as an efficient and “official” place for fans to exchange tickets, basically thereby undermining the touts who hang around outside stadia.
6. Eric was clear that his business solves a real problem for people who want to buy tickets. They want secure, reliable service where they know they can sell unwanted tickets and on the other side people want to be sure they are buying the genuine article and not being sold a counterfeit.
7. Below this level of strategic thinking about marketing Viagogo has all the internal disciplines and tactical marketing tools it uses to generate awareness about itself. This includes getting feedback from customers and making sure you stay close to their needs, adjust and adapt your services and products as you grow.
So the big question is why and how an American came to relocate to the UK to start and grow this business? Eric loves sport, learnt about the way this business operates and spotted the gap in Europe. He relocated to London and the rest is becoming history! He has chosen to be a Global entrepreneur and is chasing global dreams.
Wednesday, 22 October 2008
Paul was introduced to Andy via a common connection and found himself in an environment which was open, flexible and encouraging of enterprise. So he referred to this as motivation through mentoring. The basic idea of the lab in Cambridge was to take an idea, deploy it around the lab and if it worked try to commercialise it. This approach resulted in several companies, the biggest of which was probably Virata.
Other motivations included what we might call “Motivation through motoring” – in other words having an aspiration to be less poor and to buy a nice car! But this came later when the lab that was sponsored by AT+T was suddenly closed and the choices were between taking another job and starting a company with an emerging technology in 3 dimensional location systems (GPS for indoor applications). Paul did not fancy the 9 to 5 routines so he got together with some others in the new venture.
A fortunate meeting took place, through which the team was able to arrange for an internship with a venture capital firm where they did their market research and started to build confidence in the idea, however there were some tough business questions. Was this a GPS system or an RFID system? And who else was doing something like this? So it was difficult to value the company and raise money. They then met Richard Green who had founded Ten Sails as an incubator for ideas in “space and time”. The results of the market research and finding a CEO restored their confidence and motivation to stay the course.
Other forms of motivation included the quality of team that had started to join the company. The Board, the management team and the business angel investors are all described as world class and aligned with the objectives of the .
Ubisense and the team there are part of the wider Cambridge ecosystem – a whole group of companies in wireless, GPS, telecoms etc., So they can measure their own progress and see IPO and trade exits from time to time. They are in good company and this reassures the team. They also compete with firms that are much better funded and have evolved technology that is far superior and this too makes them feel good. There is a sense of urgency to stay ahead of the game. The links with the University and a continous source of talent makes it all the more exciting.
For Paul then – his motivations were varied and included the desire/need to earn; but as can be seen it was not just about “toys” and “technology” but included a desire for affiliation with top people, a desire to be recognized and to achieve success.
Andy Hopper has been an academic researcher for many years and has supervised over 50 PhDs, earned a Fellowship of the Royal Society for his research and the high levels of citation of his work. So he is a hard core academic. Why does he get involved with business?
For Andy – while the University provides that pillar of security he where he has caught the bug for intellectual stimulation – whether nourished by the need for citations or personal ego – it is none the less a compelling pull to continue in academia. The University environment also provides for being kept up to date on international work, new ideas and one of the benefits of this in business is that it reduces surprises of anything that may be going on in a similar field.
As Andy said – In business you can’t get any real insights due to the need to sign Non-Disclosure Agreements and follow tight protocols. But in academia it is possible to learn about new developments due to a very different culture (and you only have to deal with egos!)of publications, peer review and conferences.
There are further debates that rage between academics and entrepreneurs about whether the knowledge is to be exploited for universal gain, national gain or personal gain and if as an academic you want to step into business you need to be comfortable with the arguments.
One of the motivations as an academic engaging in business is that you get to see the practical or tangible output of your research, but if you are at the leading edge and dealing with disruptive technology with uncertain outcomes and timescales it is really hard to raise money. You need to learn about how to do this and what motivates venture capitalists and how they work. You also need to figure out how not to lose your shirt! Without these insights if you do try and embark into business you will soon lose your motivations.
Andy is also motivated by having people around him that he regards as trusted parties, people with whom he can recombine from time to time to start companies, have and share new ideas and who can share in the pain and the pleasure of the roller coaster ride of new ventures. His own labs in Cambridge have become a hive of activity in cutting edge research and from which many postdocs/faculty and staff have moved into business or combined it with academia. He has tried to create an open, flexible and an aspirational climate so that people can thrive.
In the current climate Andy’s advice is to keep doors open and maintain contacts because when the economic conditions change it will be easier to get going sooner. And by way of example Andy highlighted how his lab at Cambridge is changing direction to a different big question:
What can technology do to address the big problems of going green? What will be good for the planet and what will regulators ask technology to deliver in the future? By seeking answers to these questions it may result in commercial opportunities as well.
In a few final words – If you want to mix academia with business remember – it is possible; but if you were focused only on academia or only on business – you might go further in each case. In other words although you can have your cake and eat it – the experience can be a tough one.
(These are notes derived from the lecture rather than notes of the lecture)
Monday, 20 October 2008
ABTA had asked for a talk on surviving the downturn and thinking back – this was a really wise move in the briefing I had been given, some months ago – long before the financial meltdown began. What it meant was that the Masterclass session was packed. Here are the key messages from the presentation and the discussions that followed:
In the first instance to survive a recession companies need to look at cost drivers – both external and internal. This must be done alongside a basic sales and marketing plan that ensures revenues. The rest of this note covers all three elements.
In the travel industry the external cost drivers are:
Fuel, exchange rate fluctuations, increased costs faced by suppliers (such as hoteliers, restaurants etc.,), cost of borrowing (overdraft charges etc.,) assuming credit is even available, cost of utilities and credit card charges going up for consumers.
There is little one can do about such external costs, but it is important to understand these and make an assessment about how this will impact on customers, suppliers and our own businesses.
The internal cost drivers also need to be fully understood. What are the main costs in the business? Is it staff, floor space, transaction costs? Often these costs are hidden away. So, now is a good time for a spring clean. Take a look at your bad habits in the business – the costs that are either the cause of sloppy management or lack of planning. For example not sending out the right information; pricing errors; not firming up bookings; missed telephone numbers; printing errors, and miscalculation of inventory. Beware of mistakes and of routines which are held in place by statements such as “we have always done it like that”! If the costs being incurred do not add value to the customers ask your self – should we continue to do this?
Once you have taken a good hard look at the cost drivers and try to bring them down faster than the sales curve in the forthcoming months you have a good chance to withstand the pressures that the recession might impose on you.
One of the hardest decisions that firms will have to make is about lay-offs. I am not a fan of this strategy because with lay-offs goes the knowledge in the company and I think owners of businesses must look at everything else first. I draw inspiration from the story of Southwest airlines that were faced with tough times and where all the staff came together in a kind of “Dunkirk spirit” took pay cuts and worked hard to come out a stronger business. In the end the ground realities will determine these decisions, but for me it is always a final choice, not a first one.
One of the keys to survival is not to make the M+S error – which is to miss the trends in the market place and to go into denial for so long that you rely on loyalty for survival rather than your own commercial and competitive competence!
There are two fundamental actions. First and foremost take a look at your portfolio of existing customers. Surely they will continue to buy travel, even if at a reduced level. Are you in touch with them? Can you retain your share of their spend on travel? Don’t just mail shot a bland bit of brochure or information at them. Try to find ways to engage them in a form of dialogue. Find out about their future plans, think about how to adjust what you do and what you offer.
Get into a “research mode” to find out what is happening out there. After all if your staff is not very busy “taking bookings” – why not redirect their efforts towards finding out about the market place and perhaps generating bookings. Try and shift the mentality from order takers to order makers.
The second and slightly longer plan is to get more creative, with implications to re-organising the nature of the business you engage in. Try and get your staff and perhaps even the staff of some of the companies in your supply chain to brainstorm opportunities. Especially those who are customer facing. They often hear things from customers that get lost in the noise or are dropped because the company does not provide the particular solution. And for more senior colleagues – ask yourself – where are the customers right now and what are they doing? On a global level the numbers of people travelling has grown significantly – but not in Europe! So – how about looking further afield and bringing your expertise and experience to new markets (like Russia, China, India and elsewhere?)
Thursday, 3 July 2008
However we should look at a much wider set of political and social trends that are driving an urgent need to better understand entrepreneurship and what it means to big companies. Actually why should we worry about big companies? First – they have scale, employ large numbers of people and can get products to market. We need them!
And what are the signals for them to understand?
Since 1990 – with the fall of the Berlin Wall –there has been a domino effect in terms of reforms, in China and India and then more and more countries – all of which has lead to a dramatic shift in favour of free market econmics. The old world of two forms of economy – planned socialist systems and capitalism have collapsed into one system (as put forward by Prof Willie Brown of University of Cambridge).
This insight is pretty fundamental to us understanding the implications for entrepreneurship. We doubled the population in the free market system – almost overnight, leading to huge migrations of people, money, ideas, supply chains. In effect people and work have both moved in all directions.
We have to rethink the way that business is done, who we are dealing with and how to operate new business models. These changes have lead to insights about “the world being flat” or finding markets “at the bottom of the pyramid”.
Unless business leaders understand these changes and the implications for business they will not be able to make the right choices for innovation and growth.
Leaders are now also faced by high energy costs –this is no longer a CSR agenda for soft tree hugging hippies – fuel costs means it is a topic for the more serious minded business leader.
Navigating through these seismic shifts in our political, social and economic landscape (not to mention technology) requires – more than ever – for people in Oraganisations to think and act in “entrepreneurial ways”.
What are these ways?
In essence these are:
To be proactive, innovative and risk taking on the one hand (Covin and Slevin’s work) and to be able to put in place mechanisms for exploring and discovering opportunities – while being able to critically evaluate ideas (after all we do need to make money!) and then to have the skills and human capital the execute the plans that emerge from being creative and innovative.
These reflections are the result of working more recently with a number of major corporations at a variety of levels and it has even challenged the way that one would normally delver such education, insights and stimulation. Not least writing blogs, doing telephone lectures – (kind of podcasts), being highly interactive in workshops and working on the so called softer sides of human development – because the “hard stuff” is now so easily available from the internet!
Please explore further and come back to me if you want – see for example www.cfel.jbs.cam.ac.uk and www.transitions.co.uk
Monday, 24 March 2008
Under these various conditions of uncertainty – we come across the “window of opportunity”. When should we attempt to enter the market, when can we start to talk about our ideas? Who else is doing the same thing?
It would seem from the outside that entrepreneurial people have an uncanny knack for getting the timing right! On the whole they seem better able to make bets on when to enter a market or even when to get out – for example from holding shares in a company! They seem to be lucky, the chances are in their favour or they seem to have the ability to draw on serendipity!
Explanation of luck, chance and serendipity may all be correct in certain circumstances, but in reality all these are enhanced by people being alert to their environment, being among people who know what is going on, sharing tacit knowledge, market information and expert opinions.
As Gary Player (the golfer ) said:
The more I practise, the luckier I get,
He also said Persistence and common sense are more important than intelligence.
So be lucky – but don’t rely on it! You will need a great deal of depth and breadth of knowledge about the market place – much more than about your own product or technology. To understand market trends, customers’ hot buttons, convenience, reliability, cost advantages, existence of supply chains, the strengths and weaknesses of competition, the government regulations that might govern the markets you plan to enter, industry standards, safety criteria and much more.
This deep knowledge and ability to interpret the signals from the market has more to do with how you and your team build the business than with some element of luck. After all you are not betting on horses or playing a roulette table.
Sure there is luck that can go your way (or against you) because a competitor takes some action or there is an unexpected event – for example a disaster, but these are part of our understanding of risk and it’s management rather than a central part of a business plan!
Why? Because it seems that the formal education system is so weighted in favour of assessed learning - where we want our students to know things rather than know themselves.
There are also rather too many models of heroic leadership that seem to convey the impossible or perhaps the impression that being an entrepreneur is for those with the right genes!
But, if we think about becoming an entrepreneur as a career choice, it is not for everyone. This is not because we have to be born into such a career, anymore than we are born into academia or management or the armed forces!
Entrepreneurs are both born and made. So the argument is not to ask if they are born or made. We can make both assertions because there is no empirical evidence either way and we can refute both claims for the same reason. So what can we discern about the key entrepreneurial characteristics that may be unique to some people?
Entrepreneurs typically show higher levels of risk tolerance and ability to cope with ambiguity. They are also alert to opportunities, in the sense that they are able to make connections between apparently unrelated events and turn that into a business. They are also incorrigibly optimistic, creative in finding resources and solutions to problems. They are also highly self confident in their ability and have a strong belief in their own motivations and abilities.
Some of these characteristics may well be what we are born with, but they are shared with people from all walks of life to a greater or lesser extent.
The counterpoint is that entrepreneurs are made and this is also true, because we see that to be successful as an entrepreneur we need to be in the right environment where we either formally learn how to do it or absorb it from our families and surroundings. We also need a strong motivator. Either we grab hold of an idea and this builds and builds inside us till we get “Pulled” into the career of an entrepreneur or something happens in our normal day to day life and we get “Pushed” into it.
Under these “made” circumstances we need creative skills, living on meagre resources, being part of a community where opportunities flow past and have the managerial know-how to make things happen.
Fun and satisfaction then keeps people at it!
Monday, 10 March 2008
So it has been great to help design a course at Reading University where we have taken students through a creative process, linked it to business lectures on marketing, finance, team working, legal implications and so forth and had them make presentations using props at an exhibition style event.
Ofcourse as University we look to see if they have learnt anything by asking them to write up plans and essyas and the like, Our business friends who come to judge the output look to see if the ideas are actually feasible in real life and are often moved by the passion of the student teams.
So - what should we measure as success?
Creativity: That students learn tools and techniques; they learn they are capable of being creative; how others "create"; group dynamics when the objective is uncertain...
Convergent thinking: How to shape a vague idea into a business proposition; what to establish as the critical success factors; gaps in knowldeg that need to be covered; the ability for the team work to agree; individual learning about the dynamics of converging a creatiev idea...
Business: when is an idea actually economically feasible; what numbers does one need to look at; at what point should one go pubicwith the idea; the tacit knowldge required in commercialising an idea; marketing and sales questions; cash flow and planning; team leadership...
Employers wonder about this too. They want to know of the students are more fit for purpose after University, what practical skills they might bring and how quickly they canhit the ground running as well as what the potential is for future personal growth and development that can then make a difference to the business itself.
There is much work to do in order to better understand entrpreneurship education, but one thing is clear - that the process of students' learning is so different when this approach is taken - because it is also fun, that something of a seed is planted. The release of energy and enthusiasm is evident - so that is clear and easy to see, even if not to measure!
Maybe entrepreneurship education methodologies should be looked at more carefully to see if they can be transported into other subjects at University.
Thursday, 28 February 2008
For more information about the products and processes please look up the website for Plastic Logic. http://www.plasticlogic.com/process.php
From a talk on Enterprise Tuesday at Cambridge Unievrsity
First a few remarks from Prof Richard Friend:
“The proposition is that if we can use plastics like ink – but replace things that are useful like silicon, to provide silicon like functionality, then we can make a great revolution. We can get rid of icons like the huge factories and move to a manufacturing method where objects can be made cheaply…..”
This thinking got the first company underway – called Cambridge Display Technologies http://www.cdtltd.co.uk/ now owned by Sumitomo. The fundamental proposition is based on what are known as Polymer organic light emitting diodes (P-OLEDs). Even before CDT, the academic work was published in 1988 and there has been a stream of publications in leading journals in parallel with company development
The progress from scientific inquiry to commercialisation is a long journey and the challenges at the technical level included a search for stability of the product, scalable manufacturing processes, and finding enough performance from transistors so that the end product can do more jobs
“From when basic science was being done – to how to translate this into a product that can be scaled up – when this happens you know that the most interesting things happen in an industrial setting….”
However the virtue of a University setting for research is that we can’t keep knowledge secret, but we can patent and get value, especially if you can get a portfolio of a wide enough interest. We filed a number of patents before we published. And have filed even more patents as a company. So – in 2000 we raised £1.75m (Amadeus, Dow Ventures, CRIL) and appointed a CEO – Stuart Evans – when it felt right to form a company
There are probably three major constructs that scientists need to understand; the differences between doing science; doing technology and doing business. Each is very different and this has an impact on the nature of people that get hired into the business.
As academics we should not be ashamed of moving things into business, but we should be candid, because the interaction between academia and industry can be very valuable. If we look at plastic electronics as an example most of the research and engineering run in parallel, where the interactions, inquiries and work run backwards and forwards. Hence the University environment also gets strengthened by such interaction.
When firms are being kind to us they recognise and say that we lead them into the future. And because managing is not always straightforward we need to recognise the ultimate limitations of the Universities ability in commercialisation. Hence we need to be nice to companies. There is a very positive benefit for both parties.
A few highlighted remarks from Stuart Evans – the founding CEO
If you are going to “make it happen” by taking a deep science project to market there are a number of decision points and critical success factors. Here is what we have learnt so far:
One of the most critical decisions is to decide when to go commercial, when it is no longer a project in the lab. This requires a sense of critical mass of events, evidence and belief in the product’s future. Of course from here the next decision is whether or not to start a company. In the case of plastic electronics, there was only one choice – a company had to be started.
From this key decision the next stages include finding a top name ambassador who also believes in you and your project. This person provides a strong signal to the investor and business community that there is something in the opportunity that draws others to it.
The founders need to then raise some money to get the very early stages of the business concept underway, file patents, get basic communication “out there”.
Then you do need a CEO – who will make things happen at a very practical level, like help to raise money, hire the right people, get facilities organised and start to get to customers and build commercial evidence for further investments and commercialisation.
From here on the CEO needs to find a way to attract a top team and the very early team at Plastic Logic were absolutely at the top of their game, not least Henning Sirringhaus who made it to a Professorship at Cambridge before he turned 40.
There were a number of decisive moments, when investors put in money, including some of the top Fortune 500 companies. One of the major lessons we learnt from that experience is that try and get more than one of them to invest because you can get a better balance in the relationships. In other words you will not become dependent on one set of relationships – which can leave you in a vulnerable position. The trick is to find a lead investor, whose reputation in the market place is gold plated. This lead investor will attract others to follow.
The questions and decisions about where and how to make money – in other words building the business model is perhaps one of the most complex, once you have got underway.
There is a kind of Moore’s Law to the way cash is used up in high and disruptive technology. We had to take the technology itself from say 5 working transistors from a pool of 8 to getting 2 million to work reliably – if we were to make anything useful. This is a huge leap from the lab to the market place and requires a lot of clever engineering, money and smart people. It also requires a huge level of faith.
This level of faith comes from knowing that if you get it right you can lead to new iconic products for the future. So for example with the invention of transistors came great products of the past – the Sony walkman is an example and with further miniaturisation has come mobile phones, the blackberry and other products. So although some of our sceptics say that Plastic Logic is on a hopeless journey our belief is that we are positioning ourselves to be an iconic company. Remember that Apple has transformed itself from being a PC company to a major player in music – through the creation of an iconic product – the ipod.
From our perspective you need great science to make great market opportunities. And this in turn means if you have a great product you can be transformational in your vision.
All this requires cash:
So we have raised cash in a number of rounds starting with the very early $1.75m; then a further $3m to hire research staff, then $17m to scale up operations; $30m for a prototype line and most recently $100m for a factory in Dresden.
Take home lessons so far:
Find customers very early on.
Proof of Concept is not a prototype
Watch out for the big prize
Keep innovating and inventing
Build teams within teams
Focus on industry structure
Search for low cost capital
FT has been generous – reports that we have the best chance of being a $1bn company from a University spinout
There are very few investors in the UK with the kind of education and training that Dr Hermann Hauser has received. He completed a PhD in Physics at the Cavendish laboratories in Cambridge, the home of several nobel prize winners and source of inspiration to many generations of researchers. (add link to HH and Cavendish)
Following this training Hermann went directly into creating his first start-up – Acorn computers, described at the time as the first ever home computer, now called PCs. In other words he combined his insights in Physics with entrepreneurship. But as he then described at his keynote speech on Enterprise Tuesday, there was much to learn about doing business. Since then Hermann has personally invested in around 60 businesses and as co-founder of Amadeus Capital – probably the leading technology venture capital fund – he has influenced and shaped a further 60 or so investments.
Hermann was candid enough to talk about some of the mistakes he has experienced so that future entrepreneurs can avoid these. Actually making them seems rather easy, getting it right seems much harder! And Hermann has a stronger track record in getting it right than getting it wrong. Phew!
Here are the lessons he learnt.
Inventory. In a business that sells direct to consumers, especially if it is product based, you just have to understand when things will sell and get the volume of inventory right. At Acorn, it took a number of years to scale up production to the levels that were being demanded, but just as production levels were resolved, competition came in with products, timed their entry better and this left Acorn with unsold computers. With cash tied up in inventory – the firm had to be sold on and exit was achieved through a takeover by Olivetti.
Strategy. When you are taking a product that is new to the market, it is somewhat easy to go down blind alleys in terms of market strategy. In the case of Acorn, the team did not spot the growth of set top boxes and later with another firm they focused for too long on “switches” rather than on the chip they had designed to solve the switch problem. Getting the strategy right, together with understanding the business model and how revenues will flow is probably one of the most common challenges faced by early stage companies in the technology sector.
Not believing in yourself. As part of a growth plan – one of the ways of achieving scalability is to merge with a larger organization that has market access. But – if you do not choose your partner carefully you might find that in reality you could have done it better yourself. So a lack of self-belief might lead to the thoughts of mergers or trade exits that might come too early.
Relying more on debt than equity. In high tech when there is a great need for cash, some entrepeneurs are reluctant to part with equity and prefer to borrow. The essential difference is that if and when times get hard, banks can demand their money back. Not understanding the risk profile and using the wrong type of money to grow the business can be expensive to the business. The example provided was of a firm called Harlequin that racked up £30m of debt, rather than take in equity and eventually the bank called in the money and the firm had to be sold off for £1.00. The lenders were Natwest. (was this an early example of NatWest in the so-called sub-prime marketplace?!)
Market size estimates. Entrepreneurial over-optimism is central to self-belief and risk taking. But – thinking in terms of global market size and assuming small percentage market share is dangerous. The mistake is in not understanding market segments, customer needs and not having conversations with potential buyers.
Estimates of time to market. Although markets and customers may well have been identified, it always takes longer to persuade customers to buy! They have internal reasons to better understand how your products or services fit, issues of integration, finding budgets, trusting the suppliers and a host of other factors, all of which can delay decisions and actual spend. The delays eat into the cash available to the firm and if combined with other risks in the business can be one of the most agonizing reasons for failure – so near yet so far!
Understanding the window of opportunity. Timing. Markets and customers respond to needs and you need to get your timing right. For example – no good bringing a Christmas product out in January, or trying to launch a product solution when there is no infrastructure available to support it (service back up and so forth). Markets shift rapidly and the entry of substitutes or competitors can close a window of opportunity quite quickly. The team needs to remain alert.
Technology failure. Taking an idea from a laboratory to the market requires, proof of concept, prototypes, understanding methods of production, ease of use and scalability. At any stage in this cycle of events the technology can fail. To avoid this you will need the right type of people around you and this is yet another judgment call, to understand the critical success factors.
Amount of money needed to get to market. There is a simple rule that for every $1 to invent it takes $3 to prove the product and $10 to take it to market. And not having enough money to go to market can kill a business quite early on. Underestimating the challenges, harsh market realities, skills and communication experience, trust building needed and operational effectiveness of getting to market can all contribute to runaway costs.
Overestimating the attractiveness of the new product. As founders of a business or at least as founders of the business idea – we can easily seduce ourselves of the merits of the product. In reality the product may not do “anything” for the customer. Another bland offering or just insufficient “wow” factor. If people are to buy – they will need the product to really solve a problem they have or have so much fun/enjoyment that they can be persuaded to buy.
Having the wrong people around you. Perhaps one of the most common errors in business and the hardest of all to get right. Much as been said about the importance of having the right people, but the challenges of finding the “right” people, recruiting them, rewarding, motivating, trusting and working together is not at all easy. Often we build relationships with the people around us and so there is a fine balance between being hard nosed about business decisions and thinking of people as a resource in the business with managing the emotional, moral and social aspects of working with people.
In summary – getting it wrong is easier than getting it right and so to avoid common pitfalls, try and get some experienced people around you. Read a lot and get training in the basics of business. Build your skills, knowledge and credibility.
Wednesday, 20 February 2008
Sunday, 17 February 2008
Lord Karan Bilimoria studied Law at Cambridge, but this did not stop him from an entrepreneurial career. His interest was kindled when he was unable to drink the well known gassy lagers with Indian food! He noticed that English ale was not gassy and wondered why there was no lager without gas.
He pursued this interest with Mysore breweries in Bangalore. Cobra beer was born. As volumes grew, the brewing was moved from Bangalore to Bedford, to the Charles Wells breweries. Volumes have risen at 40% per annum and from being a niche entrant to an established brand in supermarkets and restaurants. The big vision for Cobra under present management is to become a $1billion company in terms of sales!
Karan has achieved this trajectory from having a student debt of about £20,000 to building a company worth £145 million in 18 years through a very clear focus. He is so consistent about his values and vision – to aspire and achieve against all odds.
The really interesting story is how he has managed to finance the growth of Cobra over the 18 years! His training as an accountant, prior to his law degree gave him the vocabulary, but his creativity in terms of finding solutions to funding are probably innate. He has used a variety of funding sources to retain his ownership and although he has taken in equity he still owns 50% of his company.
Small firms loan guarantee scheme;
Bills of Exchange based on an unused over draft facility of one of his clients; Debtor finance – which means “selling your invoices” to the finance company who then advance you 80% of the money owed to you immediately and the rest after they have paid;
Convertible loans – to preference shares
And finally the use of a “payment in kind” Hedge Fund instrument http://www.ft.com/cms/s/0/7f770c4c-427d-11db-8dc3-0000779e2340.html which I confess is a bit beyond me to fully comprehend!
What do we learn from Lord Karan Bilimoria. The so called “soft skills” are a major strength of the man. It is perhaps the acute awareness of these skills that enables him to leverage the relationships and trust to get the support of some of the smartest people. His personal motto is to go the extra mile; to take initiative, have integrity with what you want to do and continue to be original. It is also clear that he has passion for what he does.
In addition I would say – learn the language of business and finance! It is merely another language and no more complicated than any other discipline.
But what has this young, dynamic woman got to say about the way she hires, and then builds people into her entrepreneurial businesses? Surely we need to hear from the greyer haired entrepreneur to really understand the issues? Not a bit of it. She is also very smart and articulate.
Here are some tips that she has picked up, used or learnt through her own career:
You need to be able to make a “Land Rover bonnet” speech at the spur of a moment, much as a military leader might have to do to send his troops to battle. In other words leaders need to have the skill to be able to inspire their colleagues when needed.
The leader also needs to try and instil a team ethic where everyone comes together, especially at moments of urgent need. Can individuals within a group see themselves as team members and pitch-in when required.
Leadership is also a quality where you need to be able to “do stuff”. In other words your qualities of leadership should not start to create a distance from the coal face, especially in early stage and growing businesses.
The challenges of inheriting a team from an earlier leader are quite different to hiring your own. You need to spend much more time to get inside the heads of the people, to understand where they are coming from and what makes them tick.
Although you have a single team, there are several individuals and each has a separate need and motivation. It is really necessary to understand the strengths and weaknesses of the team members and to ensure that you can draw on the best side of each person.
Sometimes – if the business is not going well – you may need to downsize and it is here that a leader can be seriously challenged. Not so much with the “firing part”, but with the retention of those who stay. Dealing with the sense of guilt of the “stayers” and motivating them to give of their best in a really bad situation. You end up splitting teams and destroying loyalties. Take advice and have a mentor handy to deal with the pressures. In these situations you need to show the “balance sheet”, be open and people will understand more easily the driving forces of your decisions.
The worst form of team building is spending 4 days in the Brecon beacons getting wet, hungry, cold and irritable. The best is to find out what makes people tick by asking them and then developing processes to meet those needs.
Fear and respect are sometimes used in management. So is trust. People seem to use these sentiments in different ways. But at the heart of a positive team experience, there must be some combination of trust and mutual respect!
In hiring future team members, Louisa only uses networks of people. This secures trusted individuals, probably with shared values. Rather than interviewing people she also has them do a day’s work or a short assignment – a sort of “try it before you buy it” approach.
Her phone is never off – especially for colleagues. Louisa likes to be “always available and accessible”. Perhaps she is young enough for this extreme measure! Often the calls are to seek her confirmation and reaffirm her trust in the team, rather than to make decisions.
At the tail end of her speech we heard a metaphor – managers need to be like a pane of glass. To stop the bad stuff reaching people who report to you but to allow the light to shine through.
As a self confessed control-freak Louisa has worked hard on gaining a better understanding of team building and leadership and she exemplifies the possibility of making a success of taking on a leadership role.
Tuesday, 12 February 2008
Learning by Developing (LbD) is an innovative operating model which requires students to undertake projects rooted in the world of work and acquire two sets of competences. The first being generic such as work/life knowledge and skills and the second are subject specific competences.
Whatever the definition of LbD, its overall “pedagogical” lessons, the vision and its values, its implementation, the practicalities, or even the sheer magnitude of challenges in getting it adopted by 500 faculty, the most striking feature of the programme is that it turns the intent of the Institution by 90 degrees.
From being concerned about tick boxes of grades and achievements, from form filling for the Government, from being concerned about teaching units, efficiency, resource utilisation and so forth to a deep concern about enabling students to learn what they need to learn so that they may succeed in their lives and careers. This University is being run as if students matter! A value set not unlike the seminal work of Schumacher in the 1970s whose book “small is Beautiful” was a turning point in liberating the spirit of individuals.
Do Finns take risks? Well at Laurea they seem to – but they do so with a very deep sense of values, based on trust that the students will rise to the challenge and take on the behaviours and aspirations that are being expected of them. It is very early days yet to see if this is going to work, but the evidence I saw is that when you believe in people they respond. So, maybe they do not take risks after all!!
Friday, 1 February 2008
Duncan was in marketing before his mid-life crisis. And yes – he bought a motorbike – but not a Harley Davidson. He bought a bike and went round the world!! Already this man stands apart from his peers. It was during this journey when the purpose and meaning for his life became apparent, especially when he reached Africa only to find that there were so many people without the most basic of human needs – water.
So he created One Water, established an entirely transparent accounting system and by seeking and receiving help he has started to sell bottled water. Why? Because the profits from the sales of water goes to installation of “play pumps” near or at schools. These pumps use child play-power – they are roundabouts and as children play on them they pump up water –approx one litre for every rotation!
The consequence of this? Children come to school. The water is also used for cooking, the benefits of local community and for growing vegetables. A wonderful circulation of benefits in the local ecosystem. The funding for these pumps comes largely from the profits, so the business model is actually sustainable. And Duncan tells us that his little company made more profits than Nestle’s brands of water! This is some achievement of goodwill over capitalism.
So – how does Duncan “increase the odds – when he is cash strapped, resource hungry and a young emerging business?
Lesson1: Start with a goal – a vision that is truly clear and simple to articulate. I can’t agree more with this. I am trustee of a charity and we came up with a goal for the area in which we work – we want it to become a “cataract free zone”. Nice and simple and like water – eyesight is a basic need that can easily be provided.
Lesson 2: Know how much you are prepared to lose in the pursuit of your vision. It is not about being a risk taker – but more about defining your risk limits. Are you prepared to lose your home or your family? What are your limits?
Lesson 3: Be prepared to be contrarian and have the self-belief that what you are doing is the right thing. Of course there is a fine balance between self-belief and stubborn error. You need to be balanced between being open to suggestion and having a strong resolve. Only you and perhaps a mentor can sort this out. You will need to break rules (not the law) of business. Being creative and imaginative is more powerful than taking competition head-on.
Lesson 4: One of the key attributes of entrepreneurship is the need for and ability to manage credibility. You need to appear bigger than you are as a business. You need to project yourself like a peacock! A fan of feathers to attract attention. This is not to say that you should be deceptive – but it is about your mentality – being and thinking like a big business that is starting up – rather than a timid little business that hopes one day to grow.
Lesson 5: If you are getting into social enterprise – one of the strongest values you need is that of Give more than you take. People should always feel that in the balance of relationship they are getting more from you. In such circumstances the goodwill extended to you will be enormous and the combined energy of each person giving to you will propel the organisation forward.
Lesson 6: Action speaks much louder than words. Maybe this is why Nike has its brand associated with the terms “just do it” But in the case of One Water – this action followed a very clearly laid out vision. Action by itself is just irritating!!
Lesson 7: As part of your preparation – you will need to get to know your markets, customers and industries. This sounds like such a common sense statement, yet entrepreneurs, firms and even larger businesses are very weak in this area. It is this “common sense” that is still being taught in ever more sophisticated ways by Business Schools.
Lesson 8: So long as you make a strong link between socially responsible behaviours, good causes and behave in accordance with your espoused values, it is possible for customers to reward you with profits. This is really in stark contract to the pursuit of profit when values can get compromised.
I shall leave it to you to absorb the 8 lessons from a social entrepreneur. We can only delight that anecdote and theory can sometimes merge!
Thursday, 17 January 2008
Here are some of the replies - you make upi your own mind whether money matters more than personal satisfaction:
· Yes, for mostly shallow and selfish reasons, but money follows as a consequence of building a successful business, not when wealth is the principal objective.
· It is an aim,though not a sole driver for me.Apart from enjoying the material side of life,I believe money should make it to the right hands to allow it to be used 'well'.Capitalism with a conscience, I think, can address a lot of the world's problems.
· Yes it does, however that doesn't mean that money is the center of my being, nor is it my main motivation in life. For me, freedom is being able to do what you want to do, when you want to - not being tied down fiscally.
· Yes in the sense that the financial security would be good, and by definition I'd have done something with my life, potentially having created an economic constribution to others and created something for the world. Ethically it may not stand so well...
· Sure does. I'd never say no to being a millionaire. Perhaps I wouldn't want to be a high profile muilti-millionaire. For me the advantages of being a millionaire outweigh those of not being one........
· Winston Churchill once said: "History will be kind to me, for I intend to write it!" Being a millionare would mean that I have achieved at least one of my goals, and now have the means to achieve many others. This would be a good thing.
· Money is freedom so long as you have the will to make the choice to alter doing what you have to do to acquire enough money to allow you the freedom of choice to do other things.
· Yes, it does appeal to me very much. I feel having a level of financial security will allow me to do multiple things rather than just be on the treadmill to keep myself afloat.
· Sure does. I'd never say no to being a millionaire. Perhaps I wouldn't want to be a high profile muilti-millionaire. For me the advantages of being a millionaire outweigh those of not being one........
Happy to receieve comments